In response to our post about an article titled “Arbitration Myths” published by the National Arbitration Forum, U.S. District Judge W. Royal Furgeson, Jr. sent us the following [unedited] commentary via e-mail: Dear Friends: To say that arbitration awards are “approved” by a court before becoming enforceable gives the impression that a court will actually examine the merits of the arbitrator’s award. Under the Federal Arbitration Act and the case law interpreting the Act, a court does not have the authority to review an arbitration award in the same way as an appellate court would. In fact, in many instances, the arbitrator is not even required to explain the reasons for the award, so no substantive review is possible. Instead, the court’s limited function is to basically insure that the arbitrator has had no conflict and that no fraud has occurred. Therefore, as a practical matter, the arbitrator can be wrong on the facts and the law and the award still must be enforced by the court so long as there is no conflict and no fraud. Simply stated, court approval does not involve an investigation into the merits of the award. One very important criticism of arbitration is that there is no real opportunity to have an award reviewed through an appellate process, which is important to understand. Sincerely, Royal Furgeson Technorati Tags: law, ADR, arbitration

Yesterday, NPR had an interesting article about the controversial issue of mandatory arbitration of claims between businesses and individuals (employees and consumers). First, the article discusses the unfortunate story of a young woman who was allegedly raped by several men while working in Iraq for Halliburton. At issue in her case ( Jones v. Halliburton ) is a motion to compel arbitration of her tort claims filed by Halliburton. The case remains under appeal in the Fifth Circuit (we blogged about it here). The article also mentions comments made by Elizabeth Bartholet, Harvard law professor and former arbitrator at the National Arbitration Forum (NAF), one of the country’s largest arbitration firms. Bartholet claims that she was removed from her job at NAF because she ruled against a credit card company in one case. On a related note, former NAF manager Deanna Richert filed a discrimination lawsuit against NAF recently. In the suit, she alleges that NAF regularly favored business clients. See Wall Street Journal article : Did the National Arbitration Forum Pander To ‘Famous Parties’? and read the National Arbitration Forum’s Answer. Finally, the article mentions the “Arbitration Fairness Act of 2009″ which is federal legislation currently pending in Congress that would ban mandatory arbitration of employment, consumer, and franchisee claims. Link to the Senate Version: S. 931 and link to Status. Link to the House Version: H.R. 1020 and link to Status. Here is the full NPR article: Rape Case Highlights Arbitration Debate, Wade Goodwyn, June 9, 2009. Previous Coverage: Texas Bar Journal Article: The Future of Arbitration (May 13) U.S. Senate Introduces Its Own Version of the Arbitration Fairness Act (May 7) Myths of Consumer Protection Law (May 4) Arbitration Fairness Act: Analysis (April 29) Loree Reinsurance and Arbitration Law Forum Guest Post: Rectifying a Critical Flaw in the Arbitration Fairness Act of 2009 (April 27) Arbitration Fairness Day: Follow Up (April 24) April 29: Arbitration Fairness Day (April 23)

[update: see Commentary by Federal Judge about this article here] Ever wonder what are the most common myths about the arbitration process? Below is a discussion of five misconceptions about arbitration from an article by the National Arbitration Forum Blog: Arbitration costs more than court – In most consumer cases filing fees in arbitration are significantly less expensive than the filing fees required in many trial courts. Arbitration filing fees for consumer claimants at the National Arbitration Forum, for instance, are low. They start at $19 for smaller claims. Moreover, individual parties can choose to proceed in arbitration without the need to engage or pay an attorney. The arbitration process is no quicker than litigation – To arbitrate or to litigate, that is the question. Many people advocate for litigation saying it is quicker than arbitration. This simply is not true. The arbitration process is speedy. Analysis of arbitration involving consumer contracts shows a median case duration of four to six months whereas the Bureau of Justice Statistics shows that contract lawsuits last a median length of 15 to 20 months. Arbitration is nothing more than a “kangaroo court” – Inaccurate reports liken arbitration to sham legal proceedings that deny rights in the name of expediency. While it is true that the arbitration process is timely, it is not true that due process rights are forfeited. Arbitration, as conducted by leading organizations such as the National Arbitration Forum, requires arbitrators to follow the same laws that judges in court cases follow. And, arbitration decisions are approved by a court judge before becoming a legally-enforceable judgment. Businesses win more than consumers in arbitration – Have you ever heard that arbitration is better for businesses than everyday consumers? Not true. One of the most important benefits of arbitration, a faster, lower cost, and superior alternative to litigation, is that it strives to provide parties with the same outcomes they would have received in court. Studies show that arbitration outcomes are the same or even marginally better for consumers than litigation outcomes. This means that consumers get a fair shake in arbitration. No one seems to like or even understand arbitration – Unfortunately this is far from the truth. Surveys of American consumers, lawyers, and courts show that they consistently and resoundingly acknowledge arbitration. One former arbitration participant said, “I would most recommend the arbitration process for both friends and family in order to get a fair hearing and decision. I would like others to know my experience in order to create awareness of arbitration in this society where justice is sometimes prevented.” Any thoughts? Technorati Tags: law, ADR, arbitration

In an unpublished opinion, the U.S. Court of Appeals for the Fifth Circuit held that a company did not waive its right to arbitration by participating in administrative proceedings initiated by employee and affirmed the District Court’s confirmation of an arbitration award. In Green v. Service Corporation International, No. 08-20607 (5th Cir. June 2, 2009), Phillip Green was hired by SCI Management, a subsidiary of Service Corporation International (SCI) to provide funeral, crematory, and cemetery services. Green’s employment agreement with SCI Management contains the following arbitration clause: 1. Matters Subject to Arbitration. Employee and the Company agree that . . . all disputes related to any aspect of Employee’s employment with the Company shall be resolved by binding arbitration. This includes, but is not limited to, any claims against the Company, its affiliates or their respective officers, directors, employees, or agents for breach of contract, wrongful discharge, discrimination, harassment, defamation, misrepresentation, and emotional distress, as well as any disputes pertaining to the meaning or effect of this Agreement. . . . Green was terminated by SCI in 2005. Thereafter, he filed a whistleblower complaint under the Sarbanes-Oxley Act (SOX) with the Occupational Safety and Health Administration (OSHA). After OSHA dismissed Green’s complaint, he sued SCI in District Court. SCI filed a motion to compel arbitration and the District Court granted it. The arbitrators determined that SCI did not violate SOX and Green filed a motion to vacate the award, claiming that he did not agree to arbitration. SCI filed a motion to confirm the award and the District Court granted it. Green appealed. The Fifth Circuit first decided whether Green’s employment agreement with SCI Management binds Green. The Court agreed with the District Court and concluded that SCI (a nonsignatory party) can require Green to arbitrate because the agreement explicitly includes claims against affiliates. Next, the Court answered whether the dispute falls within the scope of the agreement. The Court stated that “[e]ven if the scope of the arbitration clause is susceptible to more than one interpretation, the clause must be interpreted in favor of arbitration.” Accordingly, the Court found that the dispute was within the scope of the arbitration agreement. Then, the Fifth Circuit considered whether SCI waived its right to arbitrate by defending itself in administrative proceedings. The Court applied a two prong-test: (1) Whether SCI substantially invoked the judicial process. The Court noted that the administrative proceedings before the Department of Labor were not judicial in nature and SCI did not waive its right to arbitrate. (2) Whether Green was prejudiced. The Court concluded that Green failed to show he was prejudiced by the delay. Finally, The Fifth Circuit affirmed, holding that SCI did not waive its right to arbitration by participating in the administrative proceedings at OSHA. Technorati Tags: arbitration, ADR, law, Fifth Circuit